S&P 500 Forecast as the VIX and DXY Index Bounces Back

The S&P 500 index pulled back to the lowest level since July 28 as concerns about monetary policy continued. As it dropped, the CBOE VIX index jumped to the highest point in two weeks, while the fear and greed index moved back to the neutral point. The DXY index also surged to the highest point in 20 years. However, the index is still about 10% above the lowest level this year.

VIX and fear and greed index diverge

The S&P 500, Dow Jones, and CAC 40 indices declined sharply after last week’s statement by the Federal Reserve chairman. In a statement at the Jackson Hole Symposium, Jerome Powell warned that the bank will continue hiking interest rates in the coming months. 

It will also leave rates at a high point for the foreseeable future. Moreover, other Fed officials like Neel Kashkari and Charles Evans reinforced Powell’s statements. As a result, investors expect that the bank will hike interest rates by either 0.50% or 0.75% in the coming meeting in September.

Powell’s statement had an immediate impact since analysts were expecting the bank to start slowing its rate hikes. As a result, the US dollar index rallied to the highest point in over 20 years as the currency strengthened against the euro, Swiss franc, and sterling. Similarly, the VIX index, which is the best gauge of volatility, rose to the highest point in two weeks. And after rising to the green greed zone, the fear and greed index has pulled back to the neutral point.

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